Satisfaction with employer retirement plans in decline

Workers are generally pleased with the retirement plans offered by their employers, though a new survey finds satisfaction dropping in both the defined contribution plans in general and the menu of investment options available through them.

The latest Employee Benefits Research Institute annual retirement survey also found that a majority of workers would like to see their employers offer some type of educational or financial well-being program to help them plan for retirement.

If the reported decline in employees' views of their DC plans is cause for concern, Craig Copeland, a senior research associate with EBRI, says it's important to keep perspective. After all, 80% of survey respondents still said that they are happy with their retirement benefit, even though that figure was off five percentage points from last year.

"I think 80% is still overwhelmingly high satisfaction level with DC plans," Copeland said on a recent conference call with reporters.

"In general people are satisfied with their plans, however it did move in the wrong direction, and certainly the investment options went down even more," Copeland said. "But I still see pretty high satisfaction overall."

Asked about their satisfaction with the investment options offered through their retirement plans, 77% of respondents said they are very or somewhat satisfied with their choices, down from 86% in last year's survey.

Researchers are uncertain of the reasons for the decline in employee satisfaction, but suggest that part of the challenge could be a matter of choice — that even if employees are presented with an expanding portfolio of investment options, they will still expect more.

"The trend bothers me, but I think if you ask people within a certain investment menu, I think people would always ask for more," said Neil Lloyd, a partner at Mercer and chair of EBRI's research committee.

But Lloyd cautions benefits managers against a knee-jerk response to the survey's findings, suggesting that even if employees were presented with more choices in their retirement plans, "they may not make better decisions."

The survey also unmasked a real appetite for financial counseling at the workplace. Solid majorities of respondents said that, in preparing for retirement, they would benefit from an employer program to help them plan for healthcare costs (81%), calculate how much they will need to save (79%), balance competing financial goals (70%) and plan for basic day-to-day budgeting (63%).

Student-loan debt also weighs on some workers' minds, particularly for younger employees, the survey found. Fifty-six percent of millennials said they would benefit from a workplace program to help them manage their debt from school, compared with 45% of all respondents.

The impact of student-loan debt on retirement savings has drawn the attention of some members of Congress, who have floated a proposal to authorize employers to pay into 401(k)s and other plans in the form of matching contributions for the payments their employees make on their student-loan debt, even if they aren't able to contribute to the retirement plan themselves.

Overall, debt is a prevailing concern for many of the workers EBRI polled. Six in 10 respondents say that they believe debt is hindering their plans for retirement, a fairly consistent finding over the last several years of the survey.

"Debt seems to weigh continuously on people's ability to prepare for retirement," Copeland said. "Not being able to take care of your finances now has implications for your lifetime throughout and also into retirement."

Overall, 62% of workers said that they were very or somewhat confident that they would have enough money to sustain their current standard of living in retirement, up from 56% in last year's survey. And 58% of working respondents said that they expected to have enough money to last the rest of their lives, up from 54% last year.

Among retirees polled, 82% said that they were confident that they would be able to live comfortably throughout retirement, up from 75% in last year's poll.

The survey also revealed some areas where employees' expectations for retirement can be misguided, which benefits managers might consider if they plan to develop some form of workplace financial planning program.

For instance, 80% of workers said that they planned to continue working in some capacity after they retired from their main job. But when researchers put the question to retirees, just 28% said that they actually had worked since retiring.

Additionally, 43% of retirees said that they retired earlier than planned. Most often, that was due to a health issue or structural changes at their company, such as downsizing or a reorganization. Over the years, the median age when workers polled in EBRI's survey said they planned to retire has held steady at 65. But in this year's survey, the average retirement age reported by people who had actually retired was 62.

"We're really still getting at a point where people are expecting to retire later than they do," Copeland said. "There's going to be a situation that they're not going to be prepared for retirement because that age that they had picked or expected is not going to be reached."

An early look at the impact from the economic shutdown was not as bad as feared, while industry insiders see opportunities for advisers and sponsors to talk up the value of retirement and emergency savings.